Experts warn this could be a sign of a bubble.
Crypto Vs Cash
The cryptocurrency has taken an important step: it is now worth more than all the US dollars currently in circulation.
Cryptocurrencies reached a valuation of $ 2 trillion on April 29 according to The Wall Street Journal. This is roughly the same valuation as all US dollars in circulation. However, it has since hit $ 2.25 trillion – and in the process actually exceeding the dollars in circulation.
While the statistic is incredibly fascinating and is a solid indicator of the growing popularity of cryptocurrencies, it is also a bit misleading.
This is because the US dollars in circulation are not all U.S. dollars. After all, circulation only refers to cash and coins.
It’s the same way that the money in your pocket doesn’t represent all the money you have (hopefully). Most of your cash – like the US dollar – is not liquid. There are in banks, investments and other intangible assets.
So while cryptocurrencies are worth more than all physical dollars and coins, it is certainly not worth more than all the money available.
Is it a bubble?
The crypto boom is part of a trend across many investment classes and categories such as real estate and green energy, according to the WSJ. Much of it is fueled by the Federal Reserve’s lowest interest rates.
However, the Fed says we may well be in bubble territory, saying “valuations are generally high” and are “vulnerable to large declines if investor risk appetite wanes, progress in containing the virus. disappointing or the recovery slows down ” in a May 2021 stability report.
So, as with all things finance, hope for the best and prepare for the worst. Also consider one of the Elon Musk’s more measured catches: Don’t invest your savings in assets like crypto. If you do, you’re going to be having a hard time if (and when) the bubble finally bursts.
READ MORE: What happens to stocks and cryptocurrencies when the Fed stops raining money? [The Wall Street Journal]
Learn more about cryptocurrencies: Bitcoin crashes, wiping over $ 200 billion from the crypto market
As a reader of Futurism, we invite you to join the Singularity Global Community, our parent company’s forum to discuss futuristic science and technology with like-minded people from around the world. Membership is free, register now!